Courage Under Fire !!!

First published: 6 December 2010 at 20:18

Source: BEHIND THE FIGURES by Ijeoma Nwogwugwu

ijeomanwogwugwu@thisdayonline.com

Courage Under Fire

Sanusi Lamido Sanusi, the Central Bank governor, must be everybody’s man of the moment. Well, if we exclude the 469 excitable oddballs in the federal legislature and their co-conspirator Olusegun Aganga, the gutless finance minister, most Nigerians have given Sanusi the thumbs up for displaying uncommon courage under fire. In spite of the derisive jeers by the senate last Wednesday to pummel the man into submission, he stared them in the face, making it clear that his assessment of the National Assembly’s take of total federal government overheads was based on incontrovertible figures obtained from the budget office of the Ministry of Finance.

But what I found most intriguing about the whole episode between members of the National Assembly and the CBN governor is that the legislators just didn’t get it. They tried to engage in a battle they had no hope in hell of winning. No matter how many ratios they bandied around, be it 3, 13 or 17 percent of total overheads, Nigerians were going to demand justification for the cost ascribed to the National Assembly. Until the public’s perception of them changes, there is very little they can do to win its sympathy as far as what it costs to sustain the legislature is concerned.

It is not unusual, after all, for millions of Nigerians to tune in to any of the local television stations to watch the legislators in plenary sessions. What we are confronted with more often than not are chambers that are less than one-fifths full. In their defence, the legislators might want to rationalise their perennial absences to committee meetings and oversight duties, but the watching public knows better: they are attending to their private ventures.

What the public finds most irritating is that the legislators seat for only three out of five working days in a week, go on more recesses than anyone working in the public and private sectors combined, but somehow cannot devote time to the three days to the job for which they were elected. Even the few that bother to turn up at work, only a handful are productive and make meaningful contributions to debates and the legislative process.

The confrontation between the senate Committees on Finance, Banking and Millennium Development Goals and Sanusi further exposed the magnitude of uniformed commentary pervasive in the National Assembly. The attempt to draw a parallel between the National Assembly budget and the CBN budget went to prove that the legislators would clutch at anything to make a cheap point, even at their own expense.

The Central Bank, first and foremost, is more than ten times the size of the federal legislature. Other than its head office in Abuja, it has branches and currency centres in almost every state of the federation manned by thousands of employees, and is in the process of establishing branches in the nine states that still lack CBN presence. All these branches incur overheads to run.

Other than its branch network, up to 70 percent of CBN recurrent expenditure is targeted at liquidity and currency management. In case the legislators do not know, every time the Central Bank tightens liquidity in the course of targeting inflation, it does so at a cost because it must pay interest for the money it mops up from the banking system. Similarly, as the banker to the government, it pays interest on all federal government accounts domiciled with the CBN, just as the currency used in the economy is procured and circulated at a cost. The Bank equally ramps up expenses running its organisation-wide enterprise applications through various IT initiatives and the electronic Financial Service Surveillance System (e-FASS) needed to support risk-based, consolidated and cross-border supervision of the financial system.

But beyond the dust raised by the legislature over what it does or does not expend, Sanusi’s comment once more brought to the front burner the quality of spending in the national economy and the size of government. In an earlier article published in this column four months ago titled, ‘Stop Blowing My Money!’ I expressed concern at the level of borrowing by the federal government to meet its recurrent overheads. I also warned that the budget deficit was exceeding 3 percent of GDP as recommended under the Fiscal Responsibility Act and that government needs to cut back on the excess lard in the economy.

In the said article, I wrote: “As it stands, we have too many ministries, departments and agencies, not including countless useless committees, that add no value other than serve as a drain on the treasury. Several of these government departments, committees and the officials that man them duplicate each others functions. All that is required is the political will to merge and/or scrap several of such departments to save resources.

“In ten years of democracy, the executive and legislative arms, through numerous legislations, have set up more agencies and departments of government than in our 50 years of nationhood put together. From lack of foresight, most new legislations have led to the creation of new commissions and departments that must be funded by the treasury. This does not have to be the case if the legislature is thorough, and identifies and empowers existing departments to take on new functions that bear similarity to what they already undertake.

“The amount of savings from reducing the size of government can be quite substantial. Even the centre-left leaning and liberal governments of Europe and the Americas are being forced to come to terms with the long term consequences of debilitating budget deficits and are adopting measures to cut back on the lard. Contrary to expectations, the global economy is not recovering as rapidly as some rather optimistic economists once thought. The green shoots, which sprouted a few months ago, signaling economic recovery, appear to be withering faster than the time they took to germinate.”

Although the government and CBN have tried to defend increased level of spending on the need to provide stimulus to the economy in the face of the global economic crisis and the credit squeeze in the banking system, the trickle down effect is not being felt due to the quality of spending. The sad reality is that a large chunk of spending goes towards running the government relative to capital expenditure programmes (backed by structural reforms) that create employment opportunities and open up the economy to new investment.

As it stands, Aganga, who is still struggling to round up work on the 2011 budget, has admitted that the budget deficit will climb to 6.1 percent of GDP in 2010. This, several economists believe, is grossly understated when one factors the level of pre-election extra budgetary spending that has not been captured in the appropriation and supplementary bills, costs arising from the Asset Management Company of Nigeria, and other contingent liabilities.

It is apparent that the time for a structural adjustment of the Nigerian economy can no longer be deferred. Whereas Sanusi’s dauntless face off with the legislators provided some momentary distraction, it did not take away from the fact that the economy is tottering on the brink. There can be no justification that in the last year oil production has steadily risen to over 2 million barrels per day and prices have hovered at between $70 and $85 a barrel, yet external reserves, federally collectible revenue and the current account surplus have dwindled, while economic growth has stagnated at 6-7 percent.   

Even if we were to ignore esoteric economic indicators and redirect the spot light on things that Nigerians can relate to, the picture is still not pretty. What we have is mounting insecurity arising from poverty and long unemployment lines, social and infrastructure decay, incessant power cuts despite the billions of dollars expended by government in electricity infrastructure, and general despondency.

Our economic managers, especially Aganga, who has shown a propensity for defending the indefensible, need to borrow a leaf from Sanusi by implementing fiscal policies that are sustainable, lead to economic growth, and are in lock-step with the monetary policies of the CBN. Right now the finance minister appears to be scared of his own shadow and lacks the boldness to tell politicians when the belt needs to be tightened. But he should remember that his lack of nerve coupled with feeble attempts to appease politicians does not only hurt his reputation, but the millions of Nigerians living in despair.